A quant has explained how the data of the stablecoin supply ratio (SSR) may be used to find Bitcoin buy or sell signals.
Stablecoin Supply Ratio May Be Able To Predict Bitcoin Buy And Sell Signals
As explained by an analyst in a CryptoQuant post, the stablecoin supply ratio may help us find BTC buy or sell signals.
The “stablecoin supply ratio” (or SSR in short) is an indicator that measures the ratio between the market cap of Bitcoin and that of all stablecoins.
In simpler terms, what this metric tells us is how the supply of the stablecoins compare with that of BTC. Investors usually use these fiat-tied coins when they want to escape volatile markets and hold on until the price reaches a viable reentry point.
So, in a way stablecoins represent potential dry powder for Bitcoin. When the value of the SSR is high, it means the supply of BTC is much higher than stablecoins right now. This means that there is lesser potential buying power available in the market and hence could be bearish for the price of the crypto.
On the other hand, low values of the ratio implies there is a decent amount of buying power available in the form of stablecoins at the moment. Naturally, this can be bullish for the value of BTC.
Now, here is a chart that shows the trend in the stablecoins supply ratio over the past 2 years:
The correlation between BTC price and the ratio | Source: CryptoQuant
In the above chart, the quant has marked the relevant regions of trend in the SSR RSI (a modified…